BSE to have a strategic partner in 132nd year

The Bombay Stock Exchange (BSE), the second largest exchange in Asia, on Sunday completed 131 years of service after making a humble beginning under a banyan tree in 1875.

The oldest stock exchange in Asia has come a long way from the days when trading was conducted under the tree to crying and shouting in the well, and 12 years back going silent with the beginning of virtual electronic trading platform based on the internet.

While taking the stock exchange forward with new and innovative features, the common masses are also getting due weightage as reflected in the launch of its Gujarati website on Friday to mark the 132nd foundation day.

The MD and CEO of BSE, Rajnikant Patel on this occasion also announced the appointment of Kotak Mahindra Capital as financial advisor to kick off the 51 per cent stake divestment under the corporatisation and demutualisation scheme for the BSE.

Last year in August, BSE became a corporate entity and is now set to divest 26 per cent stake to a strategic partner, which could be a stock exchange like New York Stock Exchange, a clearing house like NSDL or CDSL, a bank or a multilateral agency.

"BSE should look for a strategic partner which can bring in expertise and strategic value to the stock exchange and at the same time bring good value on the table," said a BSE member.

In such a case, the world's premier stock exchange -- New York Stock Exchange (NYSE) -- seems the right choice with highest market capitalisation of $13.9 trillion. However, another BSE broker felt that a large bank like Citibank should be considered instead of a large stock exchange.

"The Stock Exchange may not get much value compared to large banks like Citibank whose net income far exceeded NYSE," he further argued.

"However, NYSE as a strategic partner could facilitate trading in some of the listed companies without being a member of that exchange and later on trading could be possible on all the scrips on NYSE provided the Reserve Bank of India allowed such activity through fresh guidelines," he added.

The BSE, presently, has 750 members and each member has been allotted 10,000 shares of Re 1 each. A 26 per cent divestment to a strategic partner will, therefore, mean a sale of 19,50,000 shares out of a total of 75,00,000 shares.

"As 26 per cent FDI is automatically allowed for finance companies and BSE is a finance company, while divesting this much stake to a foreign company, BSE will not require any government clearance for selecting a foreign strategic partner," said a market source.